Year one of Malcolm Turnbull’s innovation agenda: A SmartCompany report card

Prime Minister Malcolm Turnbull’s Innovation Agenda turned one this week and after a 12-month period that included a hard-fought election, cabinet reshuffles and over 100 announcements on policy progress, the small business and startup communities believe there’s still more work to do.

The Prime Minister is keen to drive home that innovation is still front of mind, saying it is “the key to unlocking productivity growth, which has remained stubbornly stagnant in recent years”.

“Innovation is about so much more than technology startups,” he wrote in an opinion article in the Australian Financial Review today, slating the next stage of the plan as a major weapon against Australia’s slowing productivity.

When Turnbull unveiled the government’s innovation agenda with then Minister for Industry, Innovation and Science Christopher Pyne on December 7, 2015, he put the spotlight on startups to power Australia into another 25 years of growth.

“Even if their businesses don’t succeed, we all benefit. We learned so much from the failure of new businesses,” he said.

There were 28 key policies announced 12 months ago and the Australian business community has seen a rush of action over the past couple of weeks as developments were made on big ticket items before the clock ran out on 2016. On Wednesday afternoon current Minister for Industry, Science and Innovation Greg Hunt said that over the past 12 months “elements of the agenda have taken shape and are helping to drive a more prosperous future”.

Key areas covered in 2016

Employee share schemes plan

What it is: Removing the requirements for small companies to have to provide public disclosure documents when offering employees equity in a company as part of their remuneration, which is difficult for early stage companies, and to consult on implementing employee share schemes more broadly.

What’s been done: The Treasury Laws Amendment (Measures No.1) bill to remove the need for businesses to provide these documents publicly entered Parliament during the last sitting week earlier this month. A consultation paper that asked from submissions on the policy area closed this week.

Business and innovation initiative

What it is: A $19 million scheme designed to improve the government’s approach to contract procurement by inviting businesses to pitch to solve five policy challenges, with the winning applicants granted $100,000 to develop solutions, along with the opportunity for another $1 million in funding.

What’s been done: Applications for the program closed on November 30, and the government has indicated the winners will be working on their prototypes over the next 18 months.

Venture capital limited partnerships changes

What it is: Expanding the scope of tax exemptions for those investing in early stage companies, including doubling the size of early stage venture capital limited partnerships from $100 million to $200 million, and a new 10% tax offset for partners in new projects.

What’s been done: These changes came into effect July 1, 2016.

CSIRO innovation fund

What it is: A $200 million incubator program for startup companies, including $100 million of private investment capital.

What’s been done: The fund was launched at the start of the last parliamentary sitting week, with an announcement on December 4 that the fund will be led by Blackbird Ventures co-founder Bill Bartee. It is expected to kick into action in 2017.

Cyber security growth centre

What it is: The government will allocate $31.9 million to the a cyber security growth centre over the next four years, which will aim to develop Australia’s cyber security industry.

“It will bring together industry, researchers and governments to create a national enterprise that will provide the foundation for the development of next generation products,” Minister for Industry, Innovation and Science Greg Hunt said.

Digital marketplace

What it is: In a format that resembles the Airtasker of government contracts, the digital marketplace will allow government departments to publish briefs with project requirements and suppliers can make direct pitches .

What’s been done: A beta version of the platform has been released and in October the government reported that $15 million worth of business projects had already been listed.

Global innovation strategy

What it is: The government allocated$36 million for four different incubator and startup projects focused on hubs overseas, including $11 million to establish a “Landing Pad” project so that early stage businesses can make connections in other startup-focused cities over a 90-day period.

What’s been done: The Landing Pad projects have commenced in Tel Aviv and San Francisco, with grants for the “Global Connection Fund” also being delivered.

Applications are open until January for the Regional Innovations Programme, which will give funding to businesses working with regional partners to solve problems facing the Asia-Pacific region.

Improving insolvency laws

What it is: A review a number of elements of Australia’s insolvency laws to protect company directors from personal liability and encourage restructures rather than having companies placed in voluntary administration.

What’s been done: Submissions on proposed changes to reduce the current default bankruptcy period from three years to one year, introduce “safe harbour” provisions and change the application of “ipso facto” clauses in contracts, closed on November 4. SmartCompany understands from Treasury that the new regulations will be developed before the end of the year.

Innovation and Science Australia

What it is: An independent body established to give government advice on science and innovation matters.

What’s been done: The legislation for this body received the Royal Asset in October 2016, and the board has been announced.

The body will be chaired by Bill Ferris, with Chief Scientist Dr Alan Finkel as the deputy chair. Other members include Atlassian co-founder Scott Farqhaur and AirTree ventures partner Daniel Petre. See the full list of board members here.

Intangible asset depreciation

What it is: Given the rise of startup companies holding a number of knowledge-based assets and IP, a new option was developed for companies to self-assess the tax effective life of any intangible assets they owned.

What’s been done: This came into effect on July 1, 2016.

Equity crowdfunding changes

What it is: Changes to capital raising requirements that would allow entrepreneurs to raise equity from a number of individuals, up to $5 million, in exchange for equity in the business.

What’s been done: After a number of revisions, legislation for the government’s equity crowdfunding regulations was introduced in the Parliament at the end of November 2016. Read the details here.

Innovation visas

What it is: A new visa program that allows entrepreneurs who have at least $200,000 from a third party to come to Australia and develop projects, and new points added for skilled migration categories for individuals that have completed postgraduate study in Australia and want to stay on.

What’s been done: The visa changes commenced September 10, 2016. However, some members of the startup community have questioned whether the changes are broad enough.

“The visas technically have a ticked checkbox next to them, but I’d like to see that extended to better accommodate founding teams and experienced early-stage employees,” says Girl Geek Academy chief executive Sarah Moran.

“Let’s attract experienced hackers, hustlers and hipsters to be co-founders of Australian global companies.”

Startup tax offsets

What it is: New offsets for investing in early stage companies, including:

20% non-refundable carry-forward tax offset on investment up to $200,000 per individual, per year.

10-year capital gains tax exemption for investments in this category held for at least 12 months

What’s been done: These changes came into effect July 1, 2016.

Is the spirit of innovation alive and kicking in the community?

After several calls for public consultation, the startup and small business communities have had time to put forward their own innovation priorities. And while they are seeing progress on the government’s innovation agenda, there’s a sense the rollout is happening slower than many would like.

CPA Australia believes there has been “incremental progress” on the issues, particularly because in some areas policies have gone through amendments or revisions that business groups see as going backwards.

“Research and development carried out by companies has taken a hit, with substantial cuts to the R&D tax incentive. The $600 million in savings over the next four years will be funnelled back into “budget repair” rather than initiatives to spur innovation,” CPA Australia chief executive Alex Malley told SmartCompany.

“For our flagship innovation institution, the CSIRO, small budget top-ups have not made up for substantial cuts. The government kept the $110 million in cuts announced in the 2014 budget, which has led to up to 240 staff being let go and ongoing pressure for the organisation to de-fund certain projects in order to keep others alive.”

Others question whether the messaging has really been sold to the Australian community.

“One key thing that the federal government aimed to do, but hasn’t quite mastered, is communicating to the average Australian in a way that alleviates the fear … that innovation is going to take their job away but instead [explains] why innovation is going to be one of the key pillars of for jobs growth and our forward economy,” Blue Sky Alternative Investments executive director Elaine Stead says.

However, some members of the startup community acknowledge that the government is relatively new to the idea of “innovation”. They say Turnbull and his team should maintain momentum in what was always going to be a long-term process.

“The government is learning innovation too, and they seem to be committing to do that over the long term. To them I say thank you and #keepgoing,” Girl Geek Academy chief executive Sarah Moran says.

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